r/stocks
Question for the bubble bears
Author defends Mag 7's AI CapEx, arguing it will yield high margins via ads, subscriptions, and hardware upgrades.
- AI infrastructure buildout will eventually slow, leading to increased profit margins for AI-as-a-service.
- Future AI profits will be driven by enhanced ad revenue, subscriptions, and a hardware refresh cycle.
- Mag 7 companies are making a calculated bet on transformative technology, not a collective mistake.
- Current AI utility may not yet justify the massive CapEx expenditures initiated in 2022.
- AI-generated profits might not be sufficient to justify the current valuations of memory and semiconductor stocks.
I get that AI may not be as useful at this point in time as it was predicted to be when massive CapEx expenditures began back in 2022.
And I get that just because memory and semiconductor and other “picks and shovels” stocks are up doesn’t necessarily mean that AI will turn the kind of profit that will justify those expenditures.
However, once the infrastructure buildout reaches a level that sustains AI use adequately and CapEx slows, AI as a service profit margins will increase.
What profits? Increased ad revenue due to AI-enhanced recommendations. Personal and business AI subscriptions. A hardware refresh cycle to upgrade devices to be able to power AI.
(I will admit that I’m a little biased on that last one because I just upgraded to an iPhone that runs AI Siri and it is a total game changer.)
So, finally, my questions to The Bubble Bears: do you think that the Mag 7 is dumb? Do you think they would be mortgaging their very existence on a technology that won’t pay off? And that they would all be making this same mistake at the same time? A mistake that you can see because you are smarter than Tim Apple?